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Worldwide Exchange

News/Business. Ross Westgate, Kelly Evans. Ross Westgate and Kelly Evans consider the business stories that have global significance. New.

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U.s. 27, China 22, Us 19, Israel 18, Spain 13, U.n. 9, Europe 9, Germany 8, Austan Goolsbee 6, France 5, Italy 5, S&p 4, Greece 4, Egypt 4, New York 4, Martin Fletcher 3, Iran 3, Hu Jintao 3, Sandy 3, Cnbc 3,
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  CNBC    Worldwide Exchange    News/Business. Ross Westgate, Kelly Evans. Ross Westgate and  
   Kelly Evans consider the business stories that have global...  

    November 15, 2012
    4:00 - 6:00am EST  

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welcome to "worldwide exchange." these are your headlines. china introduces the world to its next generation of leaders. growth in germany slows in the third quarter. france surprises with a 0.2% increase in gdp, but economists expect a grimmer picture in the fourth quarter. and rocket attacks kill three in israel. the u.n. warns netanyahu to avoid a new cycle of blood shed. and president obama throwing down a challenge to congress as he gets set to begin critical budget talks on friday.
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i want to bring you the italian gdp figures. italy is just the latest p second quarter figures were revised higher to 0.7 contraction from 0.8. third quarter gdp looks like it's fallen 0.2% on the quarter. that's better than was expected. it was expected to fall by about half a%. it is down 2.4% on the year. we'll get the rest of the eurozone figures out at the top of the next hour.
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also coming up, we'll be live in beijing with updates throughout the show as xi jinping it takes over as the head of the communist party. we'll be in frankfurt for a look at how that economy has been affected. gdp showing a slowdown for germany in the third quarter. and we'll hear from the former head of the council of economic advisers austan goolsbee on how the u.s. can avoid falling off the fiscal cliff. plus we'll take you live to tokyo with japan hit by election fever. the yen is falling as a repeated call for bold monetary easing. and we'll be live in new york 5:45 a.m. for a look at the u.s. retail sector. walmart and target getting set to release third quarter numbers. chig that's ruling com uhe nus party has lifted the curtain. the unveiling seals so s xi jins
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rise. hu has seeded oig all powers and that's gives china's next leader a strong mandate. eunice has more for us this morning. it sounds like a pretty signature consolidation of power under xi. >> definitely is a consolidation of power. he'll get a very strong mandate as you had mentioned to run this country the way that he wants. he gets the three top titles, the most powerful are party chief, president as well as military commander. that is very significant because it allows him to have more control over his own agenda. when he went to meet the press this morning, he was looking very casual, looking a about folksy. when he was youtd lining the challenges ahead for the nation.
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>> our party faces many challenges and there are many pressing problems that need to be resolved. the problems among our party members of corruption, taking bribes, being out of touch with the people, undue emphasis on formalities must be addressed with great efforts. the whole party must be vigilant against them. >> the problem is, though, that it's still unclear how he's going to tackle all of those challenges and just how aggressive he's going to be allowed to be. a lot of -- one of the things people have been talking about here is also that some of the most prominent as well as boldest reformers who could have been elevated to the top brass were not. so that's leading some here to believe that going forward, the a minute strags will be more
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conservative and take any reforms step by step. >> and we'll get into that but i'm curious being there in beijing what the public reaction is to all of this. >> the two men who will are in power, but otherwise most of the people did not have any real say over who it could be and that's one of the big problems that people here and a lot of trial watchers have, that they say the country has been at this cross roads, the leadership especially xi jinping is appearing to be much more folksy and much more down to earth, but the reality is that as much as they have their people's good will and
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livelihoods in mind, we still don't know for sure what that is going to moon on a policy level. will he actually bring through reforms, will he be able to help booth the economy or will he be okay with it slowing down. so there's still a lot of guesswork as to what his policy will be and how beneficial it will be for his people. >> eunice yoon following that for us this morning. deidre is joining us. >> eunice and i'm sure many others are glad to put months of speculation to rest. he's are the seven men that took the helm that make up the committee that will take over.
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there was never any doubt about xi jinping, but officially today selected to take over the world's second largest economy. a little about xi jinping. he's taking over as president. he is seen as a straight talking with parents in high places. and kequang has rin from the very bottom. dejiang was a bit more of a surprise. these three men will head the party. zi is seen as a straight talk with parents in high places and also a beloved pop star wife. now let's go over to the bottom. these are the rest. most of these men are conservatives with the exception of shan. he's liked among citizens and officials and he is an economic guru, though he will be taking over the anti-corruption body. we also have important to note
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these two men were not compahos and they're seen as the most reformist of the bunch. so this has really disappointed some people who were hoping for quicker reform and the fact that they were not included in the standing is taken as a signal that reforms won't come price enough. back to you, kelly. >> joining us now is professor of political science temperature professor chang, good morning. this is such an important day and important transition. how significant is it that these reformists appear not to be the ones coming into office, that it's really the conservatives who maintain more of the positions on the bureau?
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>> the standing committee at the political level, those that are elected tend to have made their promotions and rapid advances in hair careers through the support of gentlemen and while hu jintao certainly made many appropriate promotions and p appointments in the past decade and these people tend to be at the central committee level, the youngest members who have just been elected owe a lot to hu jintao and they are likely to be the future leezers in ten years time. as just pointed out, some are quite old and may have to step down in another five years time. allowing the younger members to
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move up and they tend to be -- >> if that paves the way for a more reformist china, what does it mean for the next couple of years and frankly just the next 6 to 12 months? >> there is a strong depend inside on the part of the leadership. there is a fairly strong consensus with regard to economic reforms, that is to say they all agree or they all know what to do, for example, to reduce dependence on exports, to reduce dependence on infrastructure projects, to stimulate domestic consumption to allow the private sector to have a level playing field and so on on. the challenge is how do you overcome the resistance of the vested interests, how do you make sure that you continue an appropriate portion of bank credits to the private sector. in the area of political reforms, there seems to be no obvious consensus as to how to
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move ahead. these are conservative leaders and given the tone of the report of hu jintao to the party congress and the articles appearing in the people's daily in recent day, political reforms seem to be limited at least in the coming months. there will be of course emphasis on response to the people's needs, more engagement in public consultation and so on. >> that's a great point. what in your view needs to happen or is most likely to happen, and i realize those are two different questions here, what changes on the political side should we expect? >> the central government will likely spend money to further stimulate the economy on infrastructure projects and so on which actually has been
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happening in the past six months or so. that will insure economic growth rates will go back above the 8% level. the government will continue to spend money to influence the social security programs to please the people and contain the grievances generated by the widening of the gap stwt rich and poor. so these are measures along the path and they will not create controversies and they tend to be popular measures in the short term. >> professor chang, thanks very much for your time this morning. now let's check in on markets in asia. we are seeing plenty of red across the region.
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>> many hope the unveiling of the new standing committee could clear up uncertain tis and prompt a rally. the shanghai composite did rebound a bit right after the announcement, but lost more ground in the afternoon to end at a seven week high. after we didn't get any real policy catalyst. financials and commodity plays under pressure. environmental plays rallied. blue chips ended lower by 1.6%. internet giant tumbled 7% after down beat earnings, but pre-holdings surged 22% after the founder of the company doubled his stake. elsewhere, the nikkei was the clear outperformer in the region ending at a seven day high on easing hopes and a weaker yen. but sony lost nearly 9% kospi
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ended down more than 1%. the aussie market dipped to a two month low as miners and banks lost ground. kelly, back to you. >> want to get a sense, too, of how trade i happening across europe as we get under way. we're down half a percent on the stoxx 600. so broadly speaking as you can see from the colors it's a bit of a risk off morning. take a look at the bourses. ibex 35 trying to buck the trend, but elsewhere seeing red, whether in paris, ex-extra dax down 0.4%, and we'll have plenty more in germany with silvia. we can take a look at the bond space and see a similar theme playing out. prices are falling, yields are rising. they've really maintained that one percentage point spread, but
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most back up to the psychological levels if nothing else. bunds 1.33%. it's extraordinary just what low levels we're seeing over here. quick look at forex. dollar-yen up three quarters of a percent there. again, on some of the political transition that may be happening in japan. euro-dollar is a little bit higher this morning, 1.2752. and a quick look at what's happening in the commodity space because yesterday this absolutely was the one to watch. on a day when we saw u.s. markets really falling on their face, we nevertheless saw increases in oil, not exactly what you like to see. has more to do with the violence we're seeing in gaza and we'll have plenty more on that story. we're seeing brent and nymex adding more. up 0.3% for brent. showing more of a reaction than
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nymex at the $86 level. after the break, we'll head out to germany with evidence that europe's largest economy is increasingly hurt by the problems the rest the continent is suffering. and it comes as anti-austerity riots? n. spain and portugal results in physical clashes. here are scenes from central lisbon. [ female announcer ] want to spend less and retire with more? then don't get nickle and dimed by high cost investments and annoying account fees. at e-trade, our free easy-to-use online tools and experienced retirement specialists can help you build a personalized plan. and with our no annual fee iras and a wide range of low cost investments, you can execute the plan you want at a low cost.
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a couple other stories we're following this morning, russia's space agency has denied it lost communication with the international space station after a cable broke outside moscow. the story was first reported on state run news agency saying the broken kibl meant russia had lost the ability to control most of its civilian satellites. a spokesman was quick to assure that despite the broken cable, satellites and the station were continuing to operate normally. he also said the agency was able to communicate with the satellites and control them. plenty more coverage on this story at cnbc.com. further israeli strikes have
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killed three palestinians in the southern gaza strip this as three were killed in an auntment building in central israel, the first israeli fatalities since israel relaunched an offensive against gaza a day earlier. and the latest action came as the u.n. security council held an emergency meeting in new york to discuss the escalation of violence in the region. yesterday israel killed hamas' top military commander during air strikes. condemnation of the attacks from israel's neighbors have come thick and fast. iran called the attacks organized terrorism. egypt's foreign minister called for a formal u.n. security council meeting to discuss the attacks. and said they must end. >> translator: egypt strongly condemns the israeli air strike in the gaza strip and the kellings of civilians and the assassination. we strongly condemn it. >> and wide gdemonstrations
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turned violent. in spain, riot police fired rubber bullets. and in lisbon, protesters tore down barricades lobbing rocks and bottles. workers also protested in greece, france and well engine against government policies that have driven up unemployment. the gdp is expected to sling by 0.2% in the third quarter pushing the bloc officially into recession territory. the eurozone downturn is taking its toll on germany. they had resilience tocrisis. economists are warning country could see a further contraction
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in the last three months of the year as dim prospects for the currency bloc continue to weigh on consumer and business sentiment. following this for us is still via ve still radio silva a vo [ silva a vod have a . >> there were no nasty surprises, so it was more or less in line with expectations. we're strcraping around the fla line. no downward revisions, good news. so on that score, i think we can have a bit of a sigh of relief. but that's short lived because what we're really about is not the figures for the third quarter, it's really what you mentioned the sentiment indicators, the forward looking indicators, the order books, et cetera. we're heading in to a clearly very, very weak fourth quarter. and then of course the next
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question mark is what does that mean. is germany really slipping in to recession or are we just seeing a couple of weak quarters before we pick up again. that seems to be the prevailing view of most economists here and also of the ecb and bundesbank. yesterday we were told what we see now on or what we expect in germany is a bit of a sideways movement for the economy, a slow down, yes, but we expect the european economy and especially the german economy to slowly start picking up again in the first quarter of next year and solidifying it. we live a bit on hope, but that's what we take home from here. in terms of the reactions like wide, i think there were no that is ter ser prices.
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we know exsports have weports h but construction industry has picked up again. consumer demand is still relatively high. christmas expectations are relatively good. clearly running out of steam with a bit of hope steam picks up against next year. >> i just wonder if there isn't a silver lining or perverse way in which the weakening is a benefit from the point of view of eurozone integration because it will make it easier for the eu to press ahead -- i'm sorry, the ecb to press ahead perhaps with some of the measures that will be more supportive for the periphery. arguing now it has to do more to support growth more broadly without having to worry so much about push backs from the german
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people. >> i wonder if that is not a short lived benefit as it were. can it really be good for us in the only economy that was able to kind of hold its own in the eurozone is also slowing down so that everybody says it doesn't matter if we spend a bit more, let's worry about it later. and in terms of interest rates with the ecb clearly it doesn't make much difference to the economy anymore either. we're at 0.75%. this is not the better winner or loser if we save off 25 basis points. the clear game changers on extraordinary measures, of course the omt program should it be activated. but there the ball is more in the court of spain. and saying maybe the ecb could
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consider a haircut on its public debt -- on on its debt holdings to greece. so if where he get the public sector involvement in terms of haircut for greece and other on countries, that would be a big game changer. so far of course the ecb has resisted those moves. but there are clearly considerations whether at some stage this public sector haircut would not have to come and that of course would be a big game changer for the likes of greece. >> great point. thanks very much for joining us. it looks chilly there, too. we appreciate it. we'll follow more of the story next hour. over in the u.s., the congressional budget office says the u.s. economic recovery is proceeding at a pace as growth has been stupted by chronic unemployment and a lack of investment. cbo predicts that could cut gdp by 1.5% over the next decade.
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the report comes after president obama challenged congress. in his first press conference since the election, he says he's willing to compromise with republicans over how to raise new revenues to cut the definite set. he said much of the threat from the fiscal cliff would be removed if they would pass a bill to pass a tax break for americans with less than $250,000 a year. >> i believe this is solvable. i think that fair minded people can come to an agreement that does not call the economy to go back into recession, that protects middle class families, that focuses on jobs and growth and reduces our deficit. >> more from austan goolsbee on that in just a bit. egypt's foreign minister is calling on the united states to, quote, immediately speak screen to end israeli aggression on gaza. after the break, we'll hear from the middle east where israel launched a new offensive after
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rocket attacks killed israeli civilians. i always wait until the last minute. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery.
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these are your headlines. china is introducing the world to its next generation of leaders. xi jinping is set to become the next president and military leader as the inner circle is anointed. growth in germany slows while france surprises to the up side. but economists expect a grimmer picture in the fourth quarter and that's weighing on on european equities. rocket attacks killed three people in israel . we're waiting on retail sales. sterling weaker against the dollar as we see that retail sales in october fell 0.8% on the month. that's about four times as much as expected. they were expected to fall
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around 0.2%. they did fall 0.8%. i don't believe these figures are inflation adjusted. so a pretty weak picture. european markets, a quick look. for the most part been red arrows. xetra dax down half a percent. cac shed building 0.4%. and ibex 35 trying to add, but what we're seeing across the bond space should give some pause. investors rotating out of spain and italy and into bunds and gilts despite supportive comments trying to give spain a pass on the back. but until the yield pushes above
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of 6% level, there's little reason that we might see that. the once resilient auto sector is starting to feel the chill. according to a november survey, expectations among automakers sank to negative 67. no more, auto analyst at ubs joining us now. so the auto sector, we're not used to hearing about recognize. what's going on, how significant? >> in general in europe we've had support. actually germany is the only large market that has yet to correct. france is starting to correct. it is now probably determigerma turn. the quality is weak and now we are waiting for the volume to
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come down. >> what impact will this have on the automakerautomakers? who is vulnerable? >> the three germans are strong in terms of balance sheets. what it means is probably lesser capital utilization in germany because of german demand and also because all the markets globally will remain fairly weak and we see more and more of the demand in china being satisfied through local production and therefore lesser utilization of the capacity. >> if we look at the auto industry as an analogy for what's happening with the rest of the world, what you're suggesting is that there aren't a lot of places where we're seeing growth or demand opportunity. are there any bright spots? >> the u.s. market has come back quite nicely, but probably not yesterday at the new levels. so the really only healthy market is probably the u.s. >> and that makes the fiscal
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cliff discussions more interesting. but you mentioned in particular this point about corporate buyers, sounds like now showing weakness? >> they're about half of the german market. companies wanting to preserve cash in 2009, 2010, so they delayed their replacement of cars. they came back to the market in 11. that means a good market in terms of price. some delaying purchases again, so that's an issue of volume and value, as well, for the german carmakers. >> and certainly when we look at neighboring france, one of the issues there or in italy is the political interference with the automakers which are such a big employer and the unions in particular are you powerful it there. so how much on the capacity side is being held up by the political posturing as much as by what companies are willing and able to do? >> we had a few steps back
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recently in terms of hopes of restructuring possibly in europe. the only carmaker we see move forward is ford. but noford is not european base. >> and to what septembextent u. makers having to take the hit? >> something to be mindful in general. it's about 35% of european auto production is done by carmakers whose headquarters are not in europe. so they will have to decide whether it's worth investing at the same level. >> all right. thanks very much for your time this morning. now, china's unveiled its new seven member standing committee to run the country. deidre morris explains just how the process works. >> it's a complicated structure,
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but we'll try to make accepts of it here. the national party congress is the highest body within the communist party. the lucky few selected from over 80 million members across the party from all walks of life. farmers to business leaders. that number is further whittled down to the central committee here which appoints the most powerful people in china. but right here, the poliburo is where the real power lies. within that, there's an even smaller circle of power.tburo is where the real power lies. within that, there's an even smaller circle of power. in reality they're hand picked way ahead by a select few. the selection was a carefully choreographed event that really began five years ago when they were hand picked. in march they were officially take up their positions at the npc, not to be confused with the party congress. next october the new leadership will set its long term plan, but
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in reality, it was already set out in the current five year plan. as you probably noticed, a lot is decided well in advance in the com eye nus party, but what's exciting is the pace of reforms already set in motion. they may be sped up or slowed down with the new leadership. back to you. >> coming up, we'll hear from a senior economist a little later on the program. and over to japan, though, which may soon be undergoing major leadership transition of its own. let's go to tokyo for the story. >> paving the way for the dissolving of the lower house tomorrow and a snap election next month, the government and opposing parties today are ush aring bills through parliament, bills to eliminate the number of seats in the lower house and to
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allow the government to issue bonds are just some of the bills that passed through the lower house. they will likely be enacted tomorrow as the many opposing liberal party has agreed to pass them through the upper house. prime minister noda is set to call a general election on december 16th. toek i don't stocks reacted with the nikkei rise to go a one week high. the yen fell sharply topping the 80 mark against the dollar on speculation for further easing by the next government. if his party takes power, he'll press the bank of japan to take bolder moves to counter the strong yen and deflation. he says the central bank should set an inflation target at 2% or 3% and conduct unlimited easing measures to achieve it. that could even involve interest rates set below zero. back to you. still to come, austan
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goolsbee calls europe's problems fundamentally unsolvable. stay tuned for that.
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about the makeup of the new politburo. some say it's too conservative and that could mean a slower path to reforms. joining us live is senior economist for greater china at anz. raymond, looking at what we're finding out about the makeup of the new leadership, what do you think is likely to happen in the near term when it comes to further economic reforms? >> a pretty successful political transition, the very special things that i pick up is that hu jintao will also retire from the chairman, the position of chairman of central military commission. this is the first time that the previous leader is not holding that tone sure a stable transition, this time he completely retire and pass the leadership to the next presidents of china who is xi
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jinping. and also the seventwo of the me, the size has been reduced from nine member to seven member in order to ensure very efficient decision making. and that speak for a slight -- i would say a slight reform of the communist party in the new era. >> if anything, i wonder if it doesn't suggest less economic reform. >> in terms of economic reform, i think they would ensure the first year of the leadership will ensure the implementation of the plan. over the next few months, different ministers of the government has relaunched many of the investment projects that they have been talking about and that's been specified. but many investment projects has been helped. after the national congress, we believe that these type of
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reform and also the investment project well launch in terms of the reform, i think the market has been focusing on the financial sector and we believe that this will be undergoing. the banking sector reform, all the fnkts sector reform will be accelerating over the next few years. >> you mentioned relarging investment projects. isn't the whole point that we need and want reforms that encourage more of a consumption-led china? >> i think based on the working report of hu jintao and the first day of the meetings, we know china is trying to rebalance the whole economy by boosting domestic consumption and driving down the role of
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infrastructure investment in the market. but at the same time, we know many of the infrastructure investment should have been done in year 2011, 2012, and they didn't complete it. that's why we think that it will be accelerating in 2013 in order to beat the target. wages level will increase and the taxation level will be reducing. this is the kind of reform china is trying to rebalance the whole economy. >> we've talked to people about this the last couple of week. how does china do the right kind of reforms in order to make sure that it trickles down the economy. is this supportive again of making those steps forward or
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does it indicate if anything that china is reluctant to continue in that direction? >> i think they beginning of the new leadership, they will only do things clearly written under the five year plan and given that xi jinping is the new leader and first time he ruled the whole country and we also believe that many of the members probably belonging to the left wing and very conservative, so that's why the in the first year he may try to do just what has been written black and white under the plant. and then we may be able to see that after he gainful control of the whole country and the parties. >> raymond, thanks very much for joining us this morning. now, further israeli strikes has killed three palestinians in the
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southern gaza strip. this is as a rocket attack killed three in an apartment building in southern israel. they were the first israeli fatality since israel relaunched an offensive against gaza is day earlier. the latest action came as the u.n. security council held an emergency meeting in new york to discuss the escalation in violence. a top military commander was killed during air strikes. condemnation of the attacks has come thick and fast. iran called the attacks organized terrorism and egypt's foreign minister called for formal u.n. security council meeting to discuss the attacks saying that they must end. >> translator: egypt strongly condemns the killing. this is not acceptable. >> joining us to more is martin fletcher, correspondent for nbc news. hi, martin, what you can tell us, what's the latest?
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>> reporter: you mentioned that the u.n. called for an end to the violence. that didn't happen. the violence is continuing in a big way this morning. the area really is on a knife edge. israel's continuing its attacks in the gaza strip, but also very significantly for israel, targeting also the stockpiles of long range rockets that hamas has which threaten the central citizen in israel, in particular the bigger city tel aviv. so israel taking out those rocket piles from the air, also attacking from the sea. israel's army is poised at the border of gaza, reserves are being called up for a possible ground inflation of gaza, which i think nobody actually wants, but certainly a real possibility. at the same time, palestinian rocket attacks from gaza into israel are also continuing about 150 this morning, most of the israelis have been intercepted by the dome system homemade rocket defense system. nevertheless one rocket did get
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through, killed three israelis. the first casualties of this operation. so far 13 palestinians have been killed in gaza. what we're waiting to see is to what extent will the continuation of the palestinian rockets be able to kill israelis. because that will be the determining factor in how long this operation goes on for and what actually happens, whether there's a ground invasion or not. israel says it's determined to end the okay ket threat from gaza. that means continuing the tacks for several days which could of course go out of control. nobody knows the area really is on a knife edge today waiting to see how bad this will become. kelly. >> okay. martin fletcher following that story for us out of tel aviv this morning. with oil, we saw the reaction yet as the violence flared up.
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this morning just slide gains. nymex up just barely . coming off some of the highs we saw earlier in the session. president obama spoke out on a range of issues from the white house last night. cnbc's and i monday j cnbc's and i monday jab 12346789. he talked about a range of issues. on the economy and the looming fight over the fiscal cliff, the president said that he would not necessarily be totally satisfied by simply limiting tax deductions. >> i'm not going to on extend further a tax cut for folks who don't need it which would cost throw to a trillion dollars. it's difficult to see how you make that up trillion dollars if
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we're serious about deficit reduction just by closing loopholes and deductions. >> we saw a feisty barack obama here twice referencing his vehicle taker in the election saying the american people pretty much understood what they were getting with him. but the president did strike a reflective tone when he was asked about his relationships up on capitol hill. >> i think there's no doubt that i can always do better. and so i will, you know, examine ways that i can make sure to communicate my desire to work with everybody so long as it's advancing the cause of strengthening our middle class. >> the president said he's open to ideas from as many people as possible. he won't slam the door in the face of republicans and he understands that he's going to have to compromise. eamon javers, cnbc.
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>> now, budget talks will begin tomorrow between the president and senate house leaders. i caught up with austan goolsbee and asked him how the president plans on tackling the fiscal cliff. and what can be done to avoid these kinds of issues in the future. >> what's not going to happen is the president will not on the fiscal cliff agree to some extension without touching the debt ceiling to then give the opportunity for a second time for the tea party to go down and say we'll blow up the full faith and credit of the u.s. government unless we get our way. that is what happened in 2010. as a matter of what's the most pressing, obviously the fiscal cliff is the most pressing. i'm not totally convinced they'll be able to figure it out because as i say, it still feels like there's one last celebrity death match lingering in there of primarily in the people who
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came in in 2010 and their view is it doesn't matter who won the election, doesn't matter what the president said, i was sent here to stop everything and i'm going to fight him to the last. and that as i say, that mentality is -- has been the biggest road block. >> and when we look at everybody, the public spats between the imf and european commission, the changing attitudes away from austerity towards more stimulus or growth-friendly measures, how important in your view is it that there is a consensus and how much damage has been done in the time lost over the last couple of years when more aggressive austerity measures were pursued? >> the issue of what is the eurozone going to do is much, much harder problem, and in my opinion not solvable as compared to the united states. i'm of the view you have a fundamentally misaligned
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exchange rate. and that is not an easy problem to solve. either the rich countries subsidize it hold the thing together or it will be very hard to keep the eurozone together. so i don't really have a solution on that one. in the u.s., where he ought te the lesson that just engaging in mass austerity and counting on that to be stimulative is not really working at a time like this. the conditions are a little different than they were in some of the countries where people thought austerity would be a little more growth generating. i think now you have to take a second look if you're advocating big austerity and you think it will generate growth. i don't think the evidences back
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that up. >> so no solutions fort cohcomi from austan goolsbee. weekly jobless claims are out at 8:30 and they're expected to jump by 20,000 to 375,000. we're looking for the impact of hurricane sandy. the october cpi index is also out at 8:30, expected to rise 0.1%. at the 10:00, the november philly fed survey. ben bernanke speaks this afternoon about financial literacy. jeffrey lacker and richard fisher will also be speaking about the economy. walmart and target report results before the open. we'll also get the numbers from dollar tree stores, viacom and game stop. in asia tomorrow, we'll also have more coverage and analysis on china's newly announced leadership. on the economic front, hong kong and malaysia will be posting third quarter gdp figures. singapore will issue revised q3
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growth numbers. so not just the eurozone that's slowing. still to come, more on china's once in a decade leadership transition. having you ship my gifts couldn't be easier. well, having a ton of locations doesn't hurt. and my daughter loves the santa. oh, ah sir. that is a customer. let's not tell mom. [ male announcer ] break from the holiday stress. fedex office.
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. china introduces the world to its next generation of leaders. xi jinping will become the new leader as the new circle is anointed. european equities are moving lower. and president obama throwing down a challenge to congress saying the fiscal cliff issue is solvable as he gets set to begin critical bunch tkricritical bud. and rocket attacks in israel. the u.n. urges netanyahu to avoid a new cycle of blood shed.
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as expected a contraction, 0.1%. may be slightly better than the consensus estimate. roughly on line, though. annualized is closer to half a%. the core has held up okay. germany and france came in a little better than expected. netherlands among those regions showing surprising weakness. all in all the third quarter gdp figures show a contraction of 0.1%. so if you like the old two quarters of nelg difference growth rule of thumb for a recession, you can certainly get your answer there. let's hear from yergen michaels.
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what's the impact? >> not as weak as we thought. but it does not mean that this is really particularly good news. looking forward, we see more signs of weakness to come. industrial production this september which was stunningly weak. we have incoming orders for so far reasonably countries like germany that look weaker than they were before. and we probably get further contraction in gdp in the provision countries. so no sort of silver lining coming up for the next couple of quarters. and therefore we expect more contraction to come through and kind of a proper recession to take place. >> maybe the silver lining is that the this prompts ecb into more action. is that a possible drought come? sg i think the ecb action is important because it takes away the tail risk, but it does not take away the fiscal tightening,
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does not immediately improve conditio conditions. and we have the ongoing deleveraging in the private sector take place. so in that respect ecb measures are very important in terms of the omt measure respect, probably further interest rate cuts. but they alone are unlikely to prevent the recession in the euro area. and we think that gdp next year will contract by 0.7% of gdp. >> how bad will it get here? >> i think the third quarter as we heard was a bit better than expected. we probably have a minus 0.4 coming through for this year. as most of the year was already sort of in with the reasonably okay first half of the year. but what we saw this year already is that we have this large divergence between the periphery and the core countries going on and even the core
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countries are likely to show signs of weakness. >> a couple of interesting points that we saw in this, one being the netherlands. big decline. and for a country that has one of the highest household debt to gdp levels, what's the broader significant from that move? >> actually we saw private consumption would be much better than it actually came out because before there would be a bit of advance buying before the v.a.t. rate hike in october. but what we see here is really that the fallen house prices and additional stress on consumers plays a role. and this is likely to stay for a heil. and with the additional fiscal tightening coming in in the next couple of years, it will be quite difficult for the netherlands to meet its fiscal tar gets and we think that it's very unlikely that the netherlands will bring down the deficit below 3% next year. >> and lastly, we're hearing from a lot of european central bank members from other officials say a decade of adjust
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smt what wi face. talking about how a greek write-down is probable. what's the message here? is this basically officials trying to push spain into asking for aid? >> i think what the ecb wants to see, that they are not the only ones going ahead. they want to see action and at the some stage it would be very good to have some formal debt relief to come through. but the creditor countries so far not willing to provide this and looking forward to next week, we don't think that we get some form of debt forgiveness. seems more likely that it's another kind of muddle through process and with this going on, we will have very difficult environment for investment and growth for the euro area to go ahead. so without clarity where the euro area goes, the environment
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will be quite difficult. p. >> okay. thanks very much for that. now, he mentioned weakness in europe. that's extending to the u.s. we are seeing futures trying to rebond here, but again, we saw levels of decline in the range of 1.3 to 1.5 yesterday for the major bourses. this morning we're really only getting about 25 points in rebound for the dow jones industrial average. which is thousand sitting at 12,559. the nasdaq and s&p are also showing a little about the of a r rebit of a rebound, but not huge moves. investors digest the growth tigs or lack thereof. spain is trying to move to the up side adding almost 0.3%, so a little better than last time we checked in. the other three down. as we're learning about the slowing of the german economy and the ftse 100, shedding 0.4%, below the 5700 mark.
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now, we are seeing in the uk a little better, but broadly speaking a mixed picture. we started off seeing both spain and italy moving to the down side on the bond side. now italy doing a little bit better. 4.95%. the yield falling just ever so slightly maybe because those eurozone figures came in just a hair better than expected. shows you where expectations are now. and spain, we're seeing 5.95%, the level there. this of course has been a key mover for not just european trade, but for u.s. trade in the last couple weeks as spain eyes asking or not asking for a bailout. in the foreign exchange space, we're seeing interesting moves. take a look at the us aity dollar falling almost 0.4% against the u.s. dollar as concerns about slowing china are also playing out. the leadership transition of course being announced today. sterling-dollar just a little firmer. the dollar yen, nearing that 81 mark, up almost a percent. signs japan could be
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transitioning it its own political leadership. euro-dollar up about 0.2%. a quick look at commodities. brent adding just a little bit here under that $110 mark. both rallying yesterday despite the selloff in markets. not the kind of mix you like and one that's more indicative of violence in gaza certainly than any fundamental demand strength. let's spin over to asia and see what's happening across the session. let's get the recap. >> asian markets were mostly lower following a neglect it i have lead from the wall street. while lots of eyes were on the leadership transition in beijing, the shanghai composite did rebound a bit right after the unveiling of the new standing committee, but it lost more ground in late e to he said at a seven week low. we didn't get any real policy catalyst. commodity plays were all under
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pressure, but hopes of more government support. hang seng lower by 1.6%. elsewhere, the nikkei was the only bright spot in the region ending at a seven day high on easing hopes and also a weakening as you just mentioned, but sony lost nearly 9%. broad based selloffs on the kospi as foreign investors became net sellers on fears over the u.s. fiscal cliff. the aussie market slipped to a two month low dragged by minuters and banks. sensex back from the diwali holidays ending lower by 0.9% back to you. >> thanks very much. china's ruling communist party has lifted the curtain on
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its new seven man politburo standing committee. hu has ceded all former powers including his role of head of military body to xi giving him a pretty strong mandate. eunice yoon is in bay skrieijin the update. what you can tell us about the consolidation of power? >> it means xi jinping will have a very strong mandate going forward to run the country. as you had noted, he not only gets the title of president and party chief, but he'll also be the military commander. this is very significant because it means that is he going to be allowed to run his own agenda. today at the session when he came out to meet the press, he was looking quite relaxed and
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quite folksy. he was outlining the challenges ahead and also discussing a need to really reach out to the people. >> translator: our responsibility is to work with all the comrades in the party to uphold the principal that the party should supervise its own conduct and run itself with strict discipline. effectively solve major problems in the party, improve our conduct, and maintain close eyes with the people. by doing so, we will ensure that our party will remain at the core of leadership in advancing the cause of socialism with chinese characteristics. >> the problem is that it's still unclear exactly what agenda really is, whether he'll tackle economic reforms and how fast he would push through economic reforms. there are a couple omissions on the standing committee which made people here a little bit disappointed. people were talking about how the most prominent as well as
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the boldest reformers of the group that could have been forwarded into the top brass were actually left out. so that's leading people here to believe that for the most part, any reform that sd co is only going to come step by step. >> eunice, thanks very much. now we want to know of course your thoughts on all of this. worldwide@cnbc.com, @cnbcwex with thoughts on china's leadership transition.potential transition in japan, the one in the u.s. or anything else happening around the world. staying with the u.s., the congressional budget office says the u.s. economic situation is held down by concerns over lack of investment. it's also proceeding at an incredibly slow pace stunted by chronic unemployment and the cbo predicts that could cut gdp by 1 aboutment 1.5% over the next de.
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the president says he's willing to compromise with republicans over how to raise revenues. he says much of the threat from the fiscal cliff would be removed if congress passed a bill extending tax breaks to americans making less than a quarter of a million dollars per year. >> i believe this is solvable. i think that fair minded people can come to an agreement that does not cause the economy to go back into recession, that protects middle class families that focuses on jobs and growth, and reduces our deficit. i'm confident it can be done. >> president obama will begin formal budget talks with house and senate leaders tomorrow. he met with several ceos at the white house yesterday. administration officials say he told them any deficit deal must be balanced with higher taxes for the wealthy as well as retitlement reform. now let's talk with senior u.s. economist at barclays capital here in london. because you wanted to tell us just what they're going to do to resolve the fiscal cliff. maybe you have some answer that
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seems to have eluded everyone else. >> our view is probably similar to everyone else's in that there's strongen send difference to come to an agreement. the timing is the issue and the question is do we go over the cliff first before we come back. so as the president said yesterday, he's willing to look at options, but he's pretty skre skeptical that we can get the number that is he wants without a tax increase. so the outcome of the election does make it more likely that we test the cliff that we go over, tax rates go higher and we hope that incentivizes an outcome. >> this is one scenario that could play out, but you start to hear them say, well, maybe they'll be able to come to some sort of an agreement. but is that your base case view that we'll have to go over it to really reach a solution retroactively? >> our base case view is that they find some temporary fix to allow a broader discussion to take place. so if you do step back and look at where the parties were when the debt ceiling negotiations
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broke down, they really aren't that far apart. it's really more of an issue on can we accept the tax rate increase or not. so where we were at that time, the republican were willing to accept about $800 billion over a ten year period on on revenues. the president was looking for something closer to $1.2 trillion. so we're really kind of saying how much of this do we get from a tax rate, how much of there are we going to get from eliminating deductions. so the sides aren't that far apart. it's really about ideology and who will stick in their corner. >> and earlier the former hefd t head of the council of economic advisers told us his view on on how he thinks the fiscal cliff will be resolved. >> i think the president made pretty clear pretty specifically how he thought it should play out. and he won the election. so there's not any any mystery of what the president and he play book will be. he'll say let's do exactly what i said we should do. >> more on that when we come back. i always wait until the last minute.
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these are your headlines. china introduces world to its next generation of leaders. xi jinping will be its next
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president and military leader. the eurozone falls in to recession. even germany showing a slowing in growth. and president obama says the increase issue is solvable as he gets set to begin critical budget talks on friday. water two palestinians have been killed on a strike in north gaza. he'll keep an eye on the reaction to that. michael, we were just talking about the fiscal cliff. you just heard from austan goolsbee there. enlighten me, where are you seen any sort of give on brth sides that indicate we'll be able to come to an agreement this year that we cooperate reach last year and one that means we don't have to face this issue again when we hit the debt creel somethicreel something. >> both are stating their initial bargaining positions.
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democrats are looking for higher tax rates. republicans don't like that. so the public pronouncements, i wouldn't look for much. that's the frustrating part. under there, we do think there's a middle ground. some increase in tax rates, but also limit deductions. which is part of the republican's desire. >> and explain that a little bi . >> any deal would be positive, but the market wants to avoid ale roing fiscal cliff. we don't want a partial agreement. we want something closer to the grand bargain. and that grand bargain is something that says democrats are hope to entitlement reform and tax reform. >> do you really think we'll get there? >> not totally in one fell swoop, but the grand bargain that was on the table for the debt ceiling goesh yanegotiatio
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was something that would amount to a significant down payment on getting medium term debt sustainability. it's not the full solution, but you're looking for something that tells the market we can make this work even though i'd logically we're very different. >> because they're not the only ones who would like to avoid the rolling fiscal cliff as you say. >> that's right. >> more with michael in just a second. tune into cnbc later today for a very special event, maria bartiromo will sit down with the co-chairs of president obama's deficit commission in chicago. that's today at the 4:00 p.m. eastern. and still ahead, the latest fed minutes suggest a fresh round of bond purchases.
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u.s. futures are trying to stage a rebound. this morning implied to open higher by about 31 for the dow, a couple each for the s&p 500 and the nasdaq. european equity markets, though, seeing selling pressure across the board. spain bucking the trend, though giving back earlier gains.
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we are of course following the story from the mideast all morning. in the meantime, though, minutes from last month's federal reserve meeting show central bank may be preparing to unveil a new bond buying plan next month. the fed's current operation twist program is due to expire at the end of the year. meanwhile san francisco fed president john williams says qe-3 will likely extend into the second half of next year. he says he expects unemployment to remain high for some time. he's optimistic the fiscal cliff will be resolved, but says if it isn't, there is little the fed can do to solve then the blow to the economy. just want to pick up here with michael. we've seen pretty dovish comments from john williams. and we've seen the evans rule talking about 3% inflation target. so even though everyone is
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talking about the better growth outlook, should we expect more stimulus from the fed? >> yes, i think you should. since the september meeting, it's been our expectation that they would convert these purchases of treasuries in to an open-ended purchase program. so that would mean starting next year, the fed is add to go the balance sheet at a rate of about 85 billion a month and we would agree we think the fed will buy throughout 2013 and purchases would amount to about $850 billion or so over the course of the year. >> if we were to get the grand bargain on the fiscal situation, would that mean the fed does no more? >> i don't think so. the fed has said we're willing to accept some higher inflation so long as we make progress. but i don't think it will change it plan. >> why is it we're seeing
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despite growth concerns that the central bank is basically onle hold, it doesn't think qe is work something what's different about the u.s. approach? >> partly the u.s. has softer inflation dynamics than you're seeing in the uk. so the uk has been above target inflation for a long time. the expectation is that it would be coming down, it's come down generally slower than we had thought. in the u.s. inflation is rising, but not to the point where it's worrisome to the fed. so inflation around 2% to the fed is just fine, so they have some room to play with, if you will, on the inflation front. so different tradeoffs. >> michael, thanks very much for coming by while you're in town. as mentioned, violence has intensified in the gaza strip. we'll be live in tel aviv with a report next.
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#
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#. china introduces the world to its next generation of leaders. xi jinping is the company's next president and military leader as the new trimmed down inner circle is apnoibteanointed.
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the eurozone slips in to recession in the third quarter. and president obama throws down a challenge to congress saying the fiscal cliff issue is solvable. and rocket attacks from the gaza strip killed three in israel following the death of three militants in israeli air strikes. the u.n. urges netanyahu to avoid a new cycle of blood shed. dow jones industrial average is 140eing a b inshowing a bit of , add building 35 points. and the nasdaq and s&p also trying to add a couple of points. but the tone overnight there
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global markets hasn't been entirely supportive. global 300 down about 0.2% and major european bourses are the exception of spain are in the red, as well. spain trying to buck the trend. now let's take a look at budget talks beginning in the u.s. tomorrow between the president and congressional leaders. i caught up with austan goolsbee to ask him how the president plans on tackling the fiscal cliff and what can be done to avoid hitting the debt ceiling come spring. >> i think some variant of the palled approach that's like the one that was in the fiscal commission, the bowles-simpson commission, or there are other bipartisan commissions, or that they almost had last summer.
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you have on did some on the entitlement side, some on discretionary spending and some with revenue. if you try to do it without any revenue or as is in the republicans plan big tax cuts on top of the definite he s. sit reduction, i basically think you can't do it because the implied squeezing of social security, medicare, a whole bunch of things, you really have to squeeze those so hard that i think there would be immediate backlash. nobody will want to do that. and as i say, i think the president made pretty clear, pretty specifically how he thought it should play out. and he won the election. so there's not any mystery of what the president e's play boo will mean. he'll say let's do exactly what i said we should do. >> what he another more pressing issue, is it the fiscal cliff or
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the debt ceiling we're likely to hit in the first part of next year and what can be done to keep us from repeatedly running into these issues going forward? >> what's not going to happen is the president will not on the fiscal cliff agree to some good x. tension without touching the dead ceiling to then give the opportunity for a second time for the tea party to go down and hold hostages and say we'll blow up the full faith and credit of the u.s. government unit we get our way. that is what happened in 2010. the admin separation and leadership of the republicans thought, well, we're making a deal together, we're showing the world that things can be done in a bipartisan way, we're extending all the tax cuts for two years. that took away all the space there was to negotiate. and so that debt ceiling
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experience was deeply undermining of consumer confidence for seriously undermining the economy as well as being bad politics all around and contributing to the universal view in the united states that there's total dysfunction in washington. so for shush that wonure that w the same way. what's most pressing on obviously the fiscal cliff is the most pressing. i'm not totally convinced they'll be able to figure it out because it still feels like there's one last death match that's lingering in there of 2010, and it doesn't matter what the president said, i was sent here to stop everything and i'll fight him to the last. and that mentality has been the
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biggest road block. >> so he still thinks there's one last celebrity death match to take place before a resolution of the fiscal cliff. interesting stuff. now coming up, one of the world's biggest high frequency traders opens up to bob pisani about a business and industry that has received its fair tear of criticism # #
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. yesterday the top military commander was killed during air strikes on the gaza strip and condemnation of the attacks has come thick and fast. iran called the attacks organized terrorism. egypt's foreign minister called for formal u.n. security council meeting to discuss the attacks. said they must end. >> translator: egypt strongly cop dems the israeli air strike operation in the gaza strip and the killing of civilians and assassination. this is not acceptable. we strongly condemn it. >> joining us with more is martin fletcher from tel aviv. martin, what's the latest?
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>> reporter: good morning. well, the united nations that you mentioned, they called for an end to the violence. that isn't happening. if anything, it's getting worse. in fact this morning the israeli commander in the south, the army commander in the south said that yesterday's assassination of the head is just the beginning. there have been very strong israeli air attacks this morning, all across the gaza strip. not only targeting hamas leaders, but the stockpiles hamas has of long range rockets. one of israel's key goals in this operation is to eliminate the rocket threat from gaza and to that effect they've been attacking stockpiles and munition dumps, also warehouses and gun shops where the rockets are being manufactured. nevertheless, hamas has succeeded this morning firing about 150 rockets into gaza, into israel, sorry. the israelis say that their homemade oig anti-rocket defense
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system has knocked out and enter septembered about 50 of those rockets. so there hasn't been that much damage inside israel, but at least one dock get through and killed three israeli civilians, about another 70 have been taken to hospital, some seriously wounded. most with shock. while in gaza, more palestinians have been killed. the total death toll there now is at least 13 palestinians killed, about 100 hospitalized. each side makes the point that this looks like continuing and possibly getting worse. the army is poised on the border. ready if necessary for a grounds invasion. of course when these things start, no way to know how it will finish. >> martin, thank you very much. and i want to bring you a couple comments on the wire. egypt's president will be holding an emergency meeting with cabinet including his
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minister of defense to discuss aggression on gaza. morsi said he spoke to president obama to find ways to stopping a agrees and reach peace in the region. he says israelis must realize aggression is unacceptable and only leads to instability in the region. and you can see the reaction in commodities this morning. brent adding half a percent even as we're seeing broadly speaking stocks underperforming this morning. not exactly a growth friendly mix out of the markets. these are your headlines, though. china is introducing the world to it next generation of leaders. the eurozone falls in to recession after posting a decline in third quarter gdp p. even germany is showing a slowing in growth. and president obama says the fiscal cliff issue is solvable as he gets set to begin critical budget talks on friday.
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bp says it's in advance talks to settle criminal charges over the 2010 gulf oil spill. the company could pay a record fine topping $1.3 billion paid in 2009 for marketing fraud. eric holder is reportedly expected to announce the deal this afternoon in new orleans. bp shares, take a look at how they're responding, they're down 0.6%, so they are underperforming the market, down #% 8% on the year. 9 feder federal housing administration due to exhausting reserves. that could force the agency to have to draw on taxpayer funds for the first time in its 78 year history. the fha won't made the final decision until february. but it's not the only government agency that may need help. fema may need to ask congress for a bailout for its national flood insurance program claims there hurricane sandy could be four times greater than the current capacity.
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texas instruments will be cutting 1700 jobs from its wirily chip unit, about 5% of the company's total workforce. t.i. is shifting its wireless focus to the industrial and auto sectors and away from smart phones and tablets as many of those customers are you now developing their own chips. ti expects the moves to save the company about half a billion dollars a year. shares showing investor concern, down 3% in frankfurt trade this morning. now, high frequency trading is always a hot topic. not one, though, that many insiders want to discuss publicly until now. bob pisani sat down with one of the world's biggest high frequency traders. take a look. >> the biggest high frequency traders out there on any given day, they could be 5% to 10% of total trading volume that's millions of trades a day. i asked dave whether he thought day traders and long term investors could possibly compete
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against his machines. >> of course you can compete. the markets are open to anybody. long term investors, they're just playing at a totally different time frame and their ability to analyze long term fundamentals of the company doesn't change. but you always have somebody that's willing to provide short terminally liquidity to the system. >> a guy comes in, starts trading, comes home flat every day. can he compete against you? >> you know, we spent 13 years developing a good computer system and developing intellectual property around those trading systems. and so the notion that a guy can kind of trade and just kind of do it as a hobby and compete, i'm not going to say it's impossible, but what you can do in life that's meaningful without some pretty significant amount of work behind it. >> another accusation i hear a lot a many engage in trading activities that are a form of market manipulation, they employ programs that attempt to manipulate the markets.
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does that happen in high frequency trading? >> we don't feel like we have anything to hide. i'm not doing going to say nobody in the industry has ever done anything that would be viewed with suspicion. there are bad apples out there and as an industry, we need to seek those things that are distorting out of the system and find ways to diminish or push those guys out of the game. but i think the vast majority of the volume and the firms that i know that are behind it are reputable trading styles and reputable trades. >> i'll have more throughout the day on cnbc or watch it cnbc.com. stick around, because coming up next, we'll be live in new york for a look at u.s. retail sector.
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major development this morning, china has announced its new communist leadership. compared with the west, not a lot is known about the philosophies driving now the seven member politburo, but deidre has the details. >> months of speculation put to rest as these seven scrolled across the podium. there was never any doubt about sooe engine pin. xi jinping. third to walk across the podium was a bit of a surprise. zi is seen as straight talking and parents in high places and a pop star wife.
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chong is seen as the most conservative and he's a north korean trained economy. he took over as party boss. remaining members are thought to be conservative leaning except for the compromise candidate because he isn't easily grouped within either faction. he's an economic guru. and important this end of the wall, those that did not make the cut, two well-known reformists. their absence is likely seen as a set back for those opening for speedier political and economic liberalization. back to you guys.
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>> ibex still trying to buck the trend. dow, nasdaq and s&p also trying to stage a rebound, but not quite recouping the losses from yesterday. this morning dow trying to add about 40 points it at the open, about 5 for the s&p. some of the world's biggest investors are disclosing what they've been buying and selling. warren buffett was pretty busy during the third quarter. they cut stakes in j and j, kraft and procter & gamble. boosted its sizable stakes in ibm and wells fargo. here's a look at how shares are doing. j and j, procter & gamble just barely up, but big losses in deere and kraft. here's a quick look at the agenda in the u.s. weekly jobless claims 8:30 a.m., they are expected to jump 20,000
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and there will be a lot of focus on the hurricane sandy impact there. october cpi also out at 8:30. core and headline both expected to rise by about a tenth of a%. at the 10:00, it's the november philly fed survey. and we'll hear from ben bernanke this afternoon. he'll be speaking about financial literacy. they'll focus later today on the economy. now, walmart and target lead a list of retailers reporting third quarter reports today. walmart is up first 7:00 a.m. eastern. its profits are expected to rise about 10%. target will follow at 7:30 a.m. and it's expected to earn 78 cents a share. both chains are girting for the holiday shopping season which officially kicks off black friday. joining us you now, president of sw retail advisers and cnbc contributor out of new york. stacey, good morning. and which of these retailers do
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you think will show us strength this morning? >> well, the big suspension number here is the walmart same store sales number. they're facing their first positive comparison in some time here, so the big question is are they able to lap that. consensus is looking for about a 2% rise in same store sales. they have bean reinvesting in every day sales, so is the traffic still building and paying off. >> we saw walmart post a couple years of declines in same store sales. so while they want to focus on low prices, how can they pull it off when the likes of j krflt penny can't make it work? >> actually, what they've been doing is a couple years back, they actually pulled a lot of skews out of the store, they moved away from the every day low pricing. that's back. it's all about value and the best prices possible. and they've also been cutting costs and increasing efficiencies, taking those dollars and plowing them back into investing in prices,
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passing them on to the consumer. and that's been working for the past year here. again, they're facing this lap in comparisons which will be tough. so we'll see if that works. and then of course we have black friday where they're opening the earliest of any retailer. >> when it comes to being promotional and having to reinforce the low price message, what kind of hit will they take on on margins and are investors worried about that or do they see it as this is what's going to happen if they maintain their same store sales edge? >> sure. this retail, it's always the game of what's the balance here of cutting pri but at the expense of margins. walmart has been able to pull in addition efficiencies out of the organization, so their operating margins have really been flattish. last quarter gross margins were down slightly. so if they're down 10, 20 basis points, that's probably in the stock. but for them, they really have some room to be able to invest where other retailers, they
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don't have the sales or the traffic to be able to get that leverage. >> and what about a target which positions itself as a bit more discretionary, more aspiratio l aspirational. if thisser 00 he not as focused on the low priced message, will that hurt them? >> i think target is a slightly different customer here. we already know same store sales increased about 3%. they've already reported comps. we really want to hear what the trend has been. has suhurricane sandy hurt november sales. but the big deal for target, in december, they're teaming up with neiman marcus and bringing in pressure product and that's worked for them in the past to bring in the fresh exciting product. so in december, there's usually a lull after black friday. that will bring some excitement to the stores and drive traffic. >> i wonder, too, we saw h and m reporting numbers this morning. they surprised quite sharply to the down side. is there any read through here
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for retail more broadly from that surprising decline? >> yeah, h and m comps were down 5% and that was a big surprise. the street was looking for flat to slightly positive here. so h and m has been slightly volatile. their majority in europe. so obviously with walmart and target, it's all u.s. but certainly you have to look at the market and say retail is under pressure here. but in europe particularly. >> okay. stacey, joining us with the latest on on retail. we have wall mrt amart and targ shortly and then black friday always one to watch. it's a good thing twinkiess have a long shelf life because you might not find it on shelves much longer. hostess brands will ask for bankruptcy. one to keep an eye on. "squawk box" u.s. starts now.
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today's top story, the global markets and fearses of uncertainty about the looming fiscal cliff. the dow closing at a five month low. plus, we have earnings central quarterly results coming from walmart and target before the bell, we'll have them on squawk. and tensions in the middle east. israeli leaders are indicating a new offensive against military commanders. it is thursday, november 15th, 2012. i'm not joe kernen. he's out today. but we have a great show for you. squawk begins right now. welcome to quack box. i'm